How this Vancouver startup plans to stand out in the crowded robo-investing market

A new Vancouver company is hoping to snare a growing segment of the roaring online investing market, usually termed “robo-investing,” by combining a thoroughly B.C. approach to investing with hot technological advancement and low costs.

ModernAdvisor, which launched in January after closing a $2.2-million financing round, is joining about a dozen other Canadian so-called robo-advisors by leapfrogging over traditional investment broker-placed investing and providing those services online.

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Although it has been in the United States for some time, robo-advisor investment emerged in numbers in Canada only last year. Since then, it has rapidly carved out a large piece of the investing marketplace. Through technology, it facilitates investing online, usually through low-cost Exchange Traded Funds (ETFs) and so is generally more cost-effective for clients.

Robo-advisors are disrupting financial markets, much like other technologies are disrupting many other sectors. But as the crowd swells — another Vancouver-based robo-advisor, WealthBar, recently launched saying it was Canada’s only full-service online portfolio management and financial advisory service — differentiation becomes more important.

Navid Boostani, co-founder and CEO of ModernAdvisor, says his company plans to make itself distinct by being the only robo-advisor to emphasize “responsible investing,” which emphasizes consideration of environmental, social and governance factors in an investment.

The concept is increasingly gaining favour among Canadians, especially in environmentally conscious British Columbia. Environmental consciousness is a way of life on the West Coast — witness the city of Vancouver which aims to be the “Earth’s greenest city” by 2020.

Boostani says ModernAdvisor is the first Canadian online investment management platform to offer environmental, social and governance portfolios. Portfolios also include Canadian and emerging market government bond ETFs and real estate investment trusts.

The concept grew out of a conversation Boostani had with a young woman at Vancouver’s startup hub Launch Academy, who asked if his investment company would feature socially responsible investing, he says. This type of investing, usually called PRI (Principles for Responsible Investing) has been gaining traction around the world as environmental problems grow. It is being promoted by leading global agencies such as the United Nations, which has formed an organization to advance the concept.

Research showed there was also a lot of interest among younger people, particularly millennials, in this investment style. For example, in the U.S. about 75 per cent of people less than age 35 cared about responsible investing. Boostani, a millennial, realized there was a market in Canada.

“I was surprised when I looked into it more,” he said. “Like many others I didn’t know much about it and thought socially responsible investing would underperform, but when I studied it there was no difference. There are ETF’s for responsible investing now.

“It brings in my personal feelings about investment,” he added. “I believe you are going to be successful only if you are solving a real-world problem.”

The rise of ETFs and online investing has attracted a new generation of investors, who previously avoided it because of investing costs and the lack of technological access. Unlike mutual funds, ETFs trade like common stocks and so involve much lower management costs. This attracts buyers and fund managers who don’t want to be locked into expensive investments.

Canadians pay the highest fees in the developed world for investment products

“Canadians pay the highest fees in the developed world for investment products,” Boostani says. “The problem is compounded by lack of transparency and rampant conflicts of interests in the industry.”

ETFs also fit with ModernAdvisor’s reliance on smart technology to operate its business. It has only two investment managers, while three technicians constantly monitor markets and other information online.

Although he admits he spoke to face-to-face with many companies in Vancouver’s investment community to gain market intelligence, Boostani says most of his business’s use of technology helps ModernAdvisor market to the technology-aware primarily through social media, inbound marketing and a Google app.

“We think of ourselves as a tech company first,” he says. “Our clients are mostly young — they contact us over chat.

“But then, our newest client is 67 years old. He signed up online without contacting us at all.”

Tony Wanless is a business writer and founder of Knowpreneur Consultants, which advises entrepreneurial businesses.

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